Lithium market to see huge overcapacity by 2020-TRU Group

Lithium market to see huge overcapacity by 2020-TRU Group

Lithium specialists TRU Group warn the future of lithium mining and exploitation is not as lucrative as investors may believe.

Author: Dorothy Kosich
Posted: Wednesday , 19 Jan 2011 RENO, NV -

Tucson, Arizona-based lithium research consultants, TRU Group, says the 2020 lithium supply-demand forecast is "shocking" as " seemingly unstoppable supply growth will cause such huge overcapacity that the stability of the industry will be threatened."

TRU Group says it has evaluated and modeled most of the known existing lithium properties and advised a number of players on a wide variety of lithium business, investment and exploitation issues.

In presentations scheduled to be made during the IM Toronto 3rd Lithium Supply & Markets Conference this week, TRU Group's updated lithium model reveals the possibility of "massive lithium oversupply through 2020."

TRU CEO Edward R. Anderson estimates lithium demand will be 40,000 tonnes annually in the next decade while pipeline projects and expansions could increase capacity by an additional 40,000 tpy-"double what the industry needs."

Veteran lithium geologist Ihor I. Kunasz, who is also presenting for TRU at the conference, says existing lithium players "have three times the lithium concentration and also reserves that dwarf any of the new players."

Lower prices and fierce competition through 2020 is bad news for new lithium project promoters, "who will find it impossible to compete against the distinctive natural cost advantage of brine-based lithium producers Chemetall-SCL, FMC and SQM," TRU Group's research has determined.

"In addition, SQM, by far the world's largest lithium supplier, has for many years re-injected excess lithium produced into the Salara de Atacama, adding to the lithium resource of the salar," Kunasz noted. Kunasz developed the original lithium reserve model at Atacama.

TRU advises existing lithium chemical producers have the in-ground reserves and ability to meet nearly all market requirements in the next decade, simply by expanding capacity.

Anderson believes that lithium projects already in the pipeline will increase the mineral's supply-demand gap from 2013 to 2015. New development projects may exacerbate the oversupply situation between 2015 and 2020.

In his analysis, Anderson questions the need for significant new sources of lithium production, contending instead that existing low-cost (brine-based) lithium plants can expand significantly. He advised that emerging technologies-including selective iron adsorption, electrodialysis and nanofiltration "provide new options for medium-scale lithium developments."

"Lithium carbonate prices fell precipitately to $4500 per t in 2010 and will remain depressed," Anderson forecast. "Long term there is no market-driven upward-price pressure so prices will remain stable and likely below $5,000 per t."

Anderson claims that "only a select few new projects could make it into profitable production and then only as marginal suppliers. Bottom line is if you do have a good resource make sure you also have the strong possible lithium technical capability to develop it."